The Federal Housing Administration’s reverse mortgage program could go through substantial changes unless Congress grants the agency additional authority, says a report released on Friday.
The decision comes after an independent audit found the agency’s capital position has fallen to negative $16.3 billion, with the Home Equity Conversion Mortgage portion making up $2.8 billion of the total.
Due to substantial stress on the HECM program, the agency could be forced to consolidate the HECM Standard and HECM Saver products into one, and reduce the principal limit—amount available to borrowers—across all products.
If FHA is provided additional authority by Congress, the agency would prefer to take actions that allow lenders to conduct a financial assessment of borrowers and limit the initial draw to cover only mandatory obligations (i.e. closing costs, mortgage liens and federal debt) of the borrowers said Charles Coulter, Deputy Assistant Secretary of the Department of Housing and Urban Development on a call with industry leaders Friday.
As far as when the changes could take place, it’s not clear.
“We think the proposed changes could be made within a relatively short timeframe, but as discussed, we prefer to take a more balanced approach with support from Congress,” said Lemar Wooley, spokesman for HUD in an email to RMD. “Specifics details of proposed changes will follow as the process goes forward.”
The National Reverse Mortgage Lenders Association issued a statement saying that HUD has reached out to include the group in discussions as legislation is drafted over the coming weeks.
“Our role will be to serve as a thoughtful sounding board for HUD, help them get the legislation and then help them implement it,” says NRMLA President and CEO Peter Bell.
NRMLA’s board will meet in the coming week to discuss its approach to the changes and ongoing work with FHA toward that effort.